Finding 380555 (2023-001)

Significant Deficiency Repeat Finding
Requirement
G
Questioned Costs
-
Year
2023
Accepted
2024-03-15
Audit: 295343
Organization: School Town of Highland (IN)
Auditor: Crowe LLP

AI Summary

  • Core Issue: The School Corporation lacks effective internal controls to ensure compliance with federal earmarking requirements for special education funding.
  • Impacted Requirements: Non-compliance with 2 CFR 200.303, 200.403, and 511 IAC 7-34-7(b) regarding proper documentation and expenditure levels for non-public school students with disabilities.
  • Recommended Follow-Up: Establish a robust internal control system and develop clear policies and procedures to ensure proper allocation and documentation of non-public proportionate share funds.

Finding Text

FINDING 2023-001 Subject: Special Education Cluster (IDEA) – Earmarking Federal Agency: Department of Education Federal Program: Special Education Preschool Grants Assistance Listing Number: 84.173 Federal Award Number: 22619-043-PN01 Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:… (g) Be adequately documented.... " 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Condition: The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. Cause: A proper system of internal control was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation’s management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, the control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2022-2023, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. The Non-Public Proportionate Share expenditures for the 22619-043-PN01 grant award could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the non-public school budgeted expenditures. As such, we were unable to identify if the minimum amount per the grant award was expended and properly reported to IDOE as required. The lack of internal controls was isolated to the 22619-043-PN01 grant award. Identification as a repeat finding: This is a repeat finding from the immediately prior audit report (B60693). The prior audit finding number was 2021-001. Recommendation: We recommended that management of the School Corporation establish a proper system of internal control and develop policies and procedures to ensure non-public proportionate share funds are appropriately allocated to the member school based on expenses charged directly on behalf of the member school. Supporting documentation for these expenses should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan

Corrective Action Plan

CORRECTIVE ACTION PLAN OF CURRENT AUDIT FINDINGS June 30, 2023 FINDING 2023-001 Subject: Special Education Cluster (IDEA) – Earmarking Federal Agency: Department of Education Federal Program: Special Education Preschool Grants Assistance Listing Number: 84.173 Federal Award Number: 22619-043-PN01 Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency Condition: The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. Context: The School Corporation is a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2022-2023, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. The Non-Public Proportionate Share expenditures for the 22619-043-PN01 grant award could not be verified for the individual member schools. Total grant expenditures were posted as expended. The non-public proportionate share expenditures were determined by applying a percentage to the non-public school budgeted expenditures. As such, we were unable to identify if the minimum amount per the grant award was expended and properly reported to IDOE as required. The lack of internal controls was isolated to the 22619-043-PN01 grant award. Views of Responsible Official: We concur with the finding. Description of Corrective Action Plan: As a member of the Northwest Indiana Special Education Cooperative (NISEC), Highland reported their proportionate share based on a percentage of expenditures and had successful audits in doing so. When Highland was notified that this process was no longer acceptable, we immediately implemented an internal control process with NISEC which included a detailed reporting of staff work hours for nonpublic schools related to only our school corporation. The report is then reviewed and signed by the NISEC staff working for the nonpublic school and their supervisor. The employee detailed time and effort report is then provided to the NISEC finance department for a second review and signature before being reported to payroll. NISEC payroll then charges the proportionate share to the IDEA Part B and the Special Education Pre-School grants in the payroll system bi-weekly based on the time and effort report pertinent to just Highland. The time and effort reports are then used to submit the reimbursements request to the Department of Education for Highland’s proportionate share. Additionally, any IDEA Part B nonpublic material expense is broken out in detail with Highland’s proportionate share for approval by the NISEC finance office prior to vendor payment and the reimbursement request is submitted to the Department of Education. Responsible Party and Timeline for Completion: Federal regulation requires name and title of person overseeing corrective action plan and anticipated completion date. Peyton Gilmore, NISEC CFO, indicated that NISEC stopped reporting nonpublic proportionate share expenditures by percentages as of the 2022/2023 school year. An internal control procedure to report nonpublic proportionate share expenditures by detailed time and effort work of expenditures was implemented as of September 2022.

Categories

Matching / Level of Effort / Earmarking Allowable Costs / Cost Principles

Other Findings in this Audit

  • 380556 2023-002
    Significant Deficiency
  • 956997 2023-001
    Significant Deficiency Repeat
  • 956998 2023-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
84.425 Covid-19 - Education Stabilization Fund $1.72M
84.027 Special Education_grants to States $515,666
10.555 National School Lunch Program $290,676
84.010 Title I Grants to Local Educational Agencies $264,787
93.778 Medical Assistance Program $128,545
10.553 School Breakfast Program $127,687
84.367 Improving Teacher Quality State Grants $92,940
84.173 Special Education_preschool Grants $13,540
84.365 English Language Acquisition State Grants $7,203
10.649 Pandemic Ebt Administrative Costs $6,198
84.424 Student Support and Academic Enrichment Program $1,700